In the claims-handling business, everyone has his/her own style of “working a claim.” There are, however, a few healthy techniques that practitioners should uniformly follow to effectively present a business interruption claim:
1. Review the policy: Being able to recite ISO forms from memory, while impressive, is not enough. The best practice is to read the entire policy, including all endorsements, with every claim and take notes of the different categories of losses and expenses that could be covered. Sometimes the best words are found on the last page.
2. Understand your client: Not all businesses are alike. Understanding your clients’ business models, their projections, and how they maintain their books is critical. A successful and expedited business interruption claim will depend on how well the accounting data tells the story.
3. Give notice: Almost every policy requires that an insured give notice of the loss “promptly,” “as soon as practicable,” “immediately,” “within a reasonable time,” or within some other time period specified under the policy. Failure to comply with this policy condition may result in a denied claim.
4. Telling the story: In general, a policyholder bears the burden of measuring, documenting, and establishing his/her claim. Most businesses have internal accounting programs that capture and categorize the ingress/egress budget flows. Setting up a claim expense category in the accounting program (“claim schedule”) and keeping track of the expenses and invoices in real time is the best practice to document and measure the extent of the business income loss and incurred extra expenses. Producing massive reports alone is not compelling or persuasive. Modern computer programs have interesting features that will create custom accounting reports and summaries that present the hard data in a manner that tells a holistic story of loss from summary to detail (pyramid style). Organized reports presented with summaries and links to underlying hard data are extremely attractive and greatly appreciated by the carrier’s loss recovery team. These reports should be generated and submitted without delay.
5. The Meeting: Inform the carrier’s adjuster of your perception of the loss adjustment process in a small meeting. Be specific and mention areas that you find challenging. Suggest ways to overcome these obstacles, and ask the adjuster for advice on how to resolve the hurdles. If the harder issues are addressed at the beginning of the claim, the likelihood of success is almost guaranteed.
6. Cooperation: If you have followed suggested techniques 1 – 5, there should not be much left to get the claim resolved. If you have not been able to present an organized and supported claim, the policyholder will likely receive a lengthy letter requesting all sorts of information to assist the insurer in its investigation. This will inevitably cause significant delay in the adjustment process, and many business owners will not appreciate the intrusiveness of the request. Rightfully so, the information requested may infringe on trade secrets or information that fuels the business’ competitive advantages. If this is a concern, an insured should consider retaining an attorney, not only to openly discuss these concerns without fear of publicity, but also to consider the possibility of drafting and entering into a confidentiality agreement with the insurer. Most of the time, the insurer merely seeks to quantify a claim and will not oppose such an agreement.
7. Mitigation: Many policies cover only those losses that could not be avoided through reasonable post-loss mitigation efforts. With respect to business interruption coverage, an insured is often required to exercise due diligence to repair covered property damage and resume operations. Therefore, after a loss, an insured should quickly evaluate whether there are reasonable steps it can take to avoid additional business or property losses. To the extent possible, an insured may want to consider informing its insurer of its mitigation efforts to provide an opportunity for input and to avoid dilemmas after the fact. These mitigation expenses could also be covered as “extra expenses” under the policy, so following suggested technique 4 is also important for this type of coverage.
8. Document everything: Many business owners and managers already engage in the practice of documenting every relevant meeting and development in a claim, but in times of distress and anxiety after a loss, many forget to maintain this important practice. I always say, there is nothing more powerful than those green certified mail receipt cards at the post office; this practice simply makes life easier.
